Fine powders of ultrafine ï§-Fe2O3 particles have been prepared by the combustion synthesis method of the succinate precursor, with an aim to employ it as sensor material. Gas sensor studies have been undertaken on the as prepared ï§-Fe2O3 and its surface functionalized sample by incorporating fine particles of Palladium, Pd (Pd dispersed ï§-Fe2O3, hereafter called as PdG sample). The enhancement in the gas sensing behavior of the PdG sample towards test gases like EtOH (ethanol), LPG (Liquefied petroleumgas), CH4 (methane) and H2 (hydrogen) is reported. The possible reason for the improved sensing behavior of the PdG sample when compared with the as fine ï§-Fe2O3 is explained based on the catalytic activity of Pd and also on the affinity for the test gases towards Pd. The sensitivity towards H2 for the PdG sample shows intensity results. The morphology and spectral characteristics of -Fe2O3 and PdG sample are also compared.